Which of the Following Statements Is FALSE

question 90

Multiple Choice

Which of the following statements is FALSE?

• A) The most common valuation multiple is the price-earnings (P/E) ratio.
• B) You should be willing to pay proportionally more for a stock with lower current earnings.
• C) A firm's P/E ratio is equal to the share price divided by its earnings per share.
• D) The intuition behind the use of the P/E ratio is that when you buy a stock, you are in sense buying the rights to the firm's future earnings and differences in the scale of firms' earnings are likely to persist.

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Definitions:

Limited Partnership

A business structure where at least one partner has unlimited liability and other partners have liability limited to the amount of their investment.

Limited Liability Partnership

A partnership in which some or all partners have limited liabilities, protecting them from the debts of the partnership beyond their investment.

General Partner

A type of owner in a partnership who has unlimited liability and is actively involved in the management of the business.

Entrepreneur

An individual who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.